Business Groups Propose Raising Age for Entitlement Benefits

U.S. President Barack Obama addresses members of the Business Roundtable at their headquarters in Washington, on Dec. 5, 2012. The Business Roundtable has long opposed efforts to reduce the budget deficit by raising business taxes, maintaining that such an approach would make U.S. companies less competitive globally. Photographer: Kevin Dietsch/Bloomberg

Jan. 16 (Bloomberg) -- The Business Roundtable, which
represents chief executives of major U.S. companies, proposed
shoring up Social Security and Medicare by raising the
eligibility age without increasing taxes on income subject to
the Social Security payroll tax.

For Social Security, the group’s plan released today in
Washington would gradually raise the retirement age to 70 from
67, scale back benefits for wealthier recipients and switch to a
method of calculating inflation that would result in lower cost-of-living payments for current and future retirees.

“We have tried to gather three or four very pragmatic,
despite their political firepower, relatively straightforward
proposals that do the trick,” said Gary Loveman, chief
executive and president of Caesars Entertainment Corp., chairman
of the group’s health and retirement committee.

“This proposal dovetails very nicely with the demographic
realities of the workforce,” said Randall Stephenson, chairman
and chief executive of AT&T Inc. “We are going to need our
employees to work longer just to fill the needs that we have in
the work force.”

The group also offered a plan for the Medicare health
program for the elderly that would raise the eligibility age to
70 and create a system of private plans to compete with the
government-sponsored program. The proposal is similar to that
proposed by House Republicans as part of their budget and was
rejected by the Democrat-run Senate.

Means Testing

The business group proposed expanding means testing in
Medicare, or reducing benefits for upper-income recipients.

In rejecting new tax revenue as part of the plan, Loveman
said the income base on which Americans pay Social Security
payroll tax would have to increase “very substantially to draw
a sufficient level of revenue to address the long-term solvency
of the program.” That “would be far more damaging to economic
growth than what we’re asking people to consider,” he said.

The plan comes as Congress prepares for another round of
battles over fiscal issues, this time raising the nation’s
borrowing limit and heading off automatic spending cuts it
delayed until the end of February.

Business groups including the roundtable are calling for
Congress to address the shortfall in funding for Social Security
and Medicare as part of any debt-reduction plan.

Still, neither political party has shown signs it would
make the political tradeoffs to advance entitlement changes
through the Republican-led House and the Democratic-controlled
Senate.

The group’s proposal to switch Medicare to a system of
private plans that compete with the government program may be
particularly unworkable in the current congressional climate.

‘Almost Dogma’

“This has been almost dogma that: ‘we don’t want to do
this,’” said John Engler, a former Michigan governor and
president of the Business Roundtable. “It is a discussion
that’s very important to have. It wasn’t that many years ago
that choice in education was unthinkable.”

Today Medicare, Medicaid and Social Security account for 42
percent of the federal budget. By 2020, they are estimated to
account for half.

The Business Roundtable has long opposed efforts to reduce
the budget deficit by raising business taxes, maintaining that
such an approach would make U.S. companies less competitive
globally.